UPDATE 1-Exelon drops Texas reactor plan, cites cheap natgas

Aug 28 (Reuters) - Exelon Corp will halt efforts to
gain regulatory approval to build a new nuclear plant in
southeast Texas, the company said on Tuesday.

Chicago-based Exelon, the nation's largest nuclear operator,
said it notified the U.S. Nuclear Regulatory Commission that it
will withdraw its application for an early site permit for land
near Victoria in southeast Texas.

"The action is in response to low natural gas prices and
economic and market conditions that have made construction of
new merchant nuclear power plants in competitive markets
uneconomical now and for the foreseeable future," said Charles
Pardee, Exelon Generation's chief operating officer.

In 2008, Exelon announced a plan to develop two new reactors
at the Texas site, becoming the 12th applicant to seek a
combined construction and operating license (COL) from nuclear
regulators as power companies rushed to qualify for financial
incentives offered under the Energy Policy Act of 2005.

By 2010, however, industry enthusiasm for new nuclear plants
began to wane as the recession cut into electric demand, costs
for nuclear construction soared, carbon legislation was delayed
and natural gas supplies began to rise, making nuclear plants
less competitive.

Exelon withdrew its COL application, but continued to pursue
the early site permit to allow it to keep the project alive but
defer construction for as long as 20 years.

"Today's withdrawal brings an end to all project activity,"
Exelon said in a statement.

"This is all about the economics of the project, which are
driven by commodity and financial markets," said Marilyn Kray,
vice president of nuclear project development.

Following its merger with Constellation Energy, Exelon
operates more than 4,000 megawatts of gas-fired and wind
generation capacity in the Texas deregulated market.

Its StarTex unit sells electricity to more than 144,000
residential customers and its Constellation New Energy unit
sells power to nearly 35,000 commercial accounts.

Of the dozens of new U.S. reactors proposed, only six or so
may be built in the next decade.

The NRC has so far approved licenses to allow Southern Co
to build two new reactors in Georgia and Scana Corp
to build two reactors in South Carolina.

After the March 2011 nuclear disaster in Japan, NRG Energy
said it would stop investing in development of two new
reactors at the existing South Texas Project station 90 miles
southwest of Houston, but partner Toshiba continued
with the project.

Late last year, the NRC said it would not issue a license to
build the new STP reactors because current project ownership
does not meet foreign ownership restrictions.

Dallas-based Luminant, a unit of Energy Future Holdings
, has delayed the completion schedule for its proposed
two-unit expansion at the Comanche Peak nuclear station in north
Texas until 2021 and 2022.

Earlier this month, the NRC said it would suspend issuing
final decisions on nuclear licenses until the agency resolves
the complicated issue of spent nuclear fuel.